Clearway Energy, Inc. (CWENA) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Thank you so much for joining our webcast today. Really appreciate you joining. For those that aren't familiar, I'm Dimple Gosai, I head up our U.S. Cleantech Research at BofA [ Sec ] in New York. Today, we're pleased to welcome Mr. Craig Cornelius, who's the President and CEO of Clearway Energy Group and Clearway Energy. Craig has been leading one of the largest Clean Energy platforms in the U.S. focused on accelerating the transition to renewable power. And I'm looking forward to hearing more from you today. So thanks so much for joining us, Craig. [Operator Instructions] In the meantime, Craig, why don't you kick things off by giving us an update on Clearway and an overview of where the company is headed. Thank you.

Yes. Thanks very much, Dimple. Really glad to be with you today and for all the dimensions that Bank of America has been a key player in the growth of the business that we are today. So yes, starting with the profile of where we stand with Clearway today. As those who are energy professional investors on this call certainly know and also generalists are observing energy demand is rising rapidly in the U.S. today, and that's creating a huge need for new infrastructure to supply it. And here at Clearway, we deploy the solutions that are best positioned to meet that need. We offer investors the ability to participate in the compelling growth trajectory of American energy infrastructure with assets that are clean and that offer predictable cash flows. Clearway aims to provide an attractive double-digit annual total return to our investors without exposing them to the potential risk that they may find with other energy investments. The expected return proposition comes from a dividend that yields about 5% today, combined with cash flows that we expect to grow 5% to 8% plus percent into the long term. We're one of the largest owners of power assets in the U.S. with a diversified portfolio of wind, solar, battery and Flexible Generation technologies that now total more than 12 gigawatts of net ownership and projects that are arrayed across 27 states. Our team includes approximately 900 hard-working energy professionals, including those who operate our assets safely and with best-in-class standards for the long term. Each of our operating assets is a long-term member of its community, creating a positive social and economic impact beyond energy generation. And it's the way that we show up in the communities that we serve that is one of the things that we're most proud about Clearway. The business is made up of 2 segments. Our Renewables and Storage segment makes up 75% of our earnings power. We're one of the largest owners of utility scale renewable and storage assets in the U.S. with a 9-gigawatt portfolio of long-lived assets in attractive locations. Our renewable fleet has a weighted average contract life of 11 years with creditworthy counterparties underpinning steady cash flows and is where we grow most of the business today. Our Flexible Generation segment makes up our remaining pro forma cash flows. The assets in that segment of our fleet are modern and efficient natural gas generators primarily located in California. These assets are some of the lowest emissions intensity dispatchable resources in the state, and they provide critical grid reliability services that sustain power grid capacity as the state's energy transition continues. As I mentioned earlier, Clearway is continuing to grow our fleet and our earnings base. We've targeted annual growth of 7% to 8% between now and 2030 across 3 redundant growth pathways. First, we optimize our fleet to enhance the value of our existing assets and extend their useful lives. We achieve this through repowerings, battery retrofits and contract extensions on those assets in our fleet today. Second, we invest in new contracted assets developed by Clearway Group, which is Clearway Energy, Inc.'s parent company and largest shareholder. Clearway Group is advancing a development pipeline of over 27 gigawatts that provides a sizable and recurring pathway for future growth with projects that are cited, crafted and structured to deliver accretive growth for CWEN. Third, we expand our asset base by acquiring projects from third parties, focusing on those that complement our existing fleet and allow us to leverage platform capability for value-added returns. Thanks to the tireless efforts of our collective enterprise, we've crafted solid building blocks for our growth outlook through 2030 and have tremendous confidence in that outlook. We have a clear line of sight to successfully commercialize our projects reaching operation in 2026 and 2027. Substantially all development projects planned to be funded by CWEN in those years to meet our goals are ready to go. Additionally, the projects being developed by Clearway Group for completion in 2028 and 2029 are substantially larger in total volume than what we need to build to meet the top end of our 2030 CAFD per share goals. To fund this attractive growth, we plan to use simple, transparent funding sources such as retained cash flows, corporate debt issuances and modest equity issuances in line with the framework we've announced. We will increasingly utilize retained cash flow in particular, given our updated payout ratio target, which aims to pay out 70% or less of our cash flows as a dividend as we reach the end of the decade. This funding source, along with our overall capital plan, provides our investors with certainty on how we will fund our long-term growth, which we think our investors have appreciated. So when putting it all together for investors who want exposure to the clean energy assets fueling America's energy dominance, Clearway provides a compelling investment opportunity, and I'm looking forward to getting into a further conversation with you about how we'll do just that.

Thank you for that, Craig. Beautiful setup. I want to go -- touch on a point that you made earlier on, right? You've set a $2.90 to $3.10 CAFD per share target for 2030 with visibility, like you said, through contracted assets, right? So if you wouldn't mind, what are the practical levers that could push you above the 7% to 8% CAGR, particularly within the CEG pipeline of late-stage assets. Could you talk a little bit more about that, please?

Yes, sure. So first, mapping back to the redundant growth pathways that we'd articulated, continuing strong execution with the operation of our existing fleet, continuing enhancement on our road map for operating that fleet over time with cost efficiencies on maintenance capital and performance enhancement in concert with our equipment vendor partners and extension of open contract positions on resource adequacy and open energy in excess of what we've conservatively embedded in our CAFD range is one of those things that could take us to the high end or better of that $3.10 top end 2030 goal. And our track record of being cautious about the ability of the existing fleet to contribute to long-term goals is pretty well proven. So if we can continue to outperform on what's embedded in those long-term goals from our existing fleet, that's one of the ways that we could beat $3.10 in CAFD per share in 2030. Second, the pipeline of projects being advanced by Clearway Group, as I've noted, in aggregate, constitutes more potential investment opportunities for Clearway Energy, Inc., in particular, in 2028 and 2029 than Clearway Energy, Inc. would need to invest in, in order to hit the top end of that goal of $3.10 per share. So should Clearway Group continue to demonstrate its historical track record of successful development risk retirement and construction mobilization, that will create a larger opportunity set for CWEN to invest in. And to the extent that CWEN's access to capital markets puts it in a position to be able to increase the total investment tempo of the business as we get to the end of the decade, that also would give it the opportunity to own more assets as we're entering 2030 and receive more CAFD per share from them. Two last ways that we could exceed that $3.10 per share goal. First, to the extent that we continue to outperform the CAFD yields on investments that we mobilize above the 10.5% average planning target that we've delivered, that will contribute, and it's a very helpful way of compounding the accretion on new capital that's deployed. And then last, to the extent that we engage in opportunistic M&A that's complementary to the fleet, which we don't plan on when we set the targets, that would also put us in a position to further outperform those goals. So our track record over time has been that when we set these mid- to long-term goals, we set them at a level where we have high confidence that we know how to meet them. And then as we move through quarters and years and retire risks and also make progress on incremental either investment opportunities or fleet improvement, then we set our sights on an even more ambitious goal.

Perfect. And then if I had to think about it nearer term, right, to what extent is the 2027 to 2029 deployment plan of, call it, $1.9 billion to $2.1 billion already spoken for? And where do you see the biggest risk to kind of achieving that cadence?

Yes. We -- in our most recent earnings call, we took the step, I think, to go further than most peers do in providing a transparent outlook into not just what we plan to bring online next year, but what is in execution for potential investment by Clearway Energy, Inc. in 2027, both in our fleet enhancement program with the succession of repowering investment opportunities and also in our sponsored developed pipeline. And what was visible in the disclosures we provided then is that for the investments that CWEN would need to make to be able to compound again in the long-term 5% to 8% range on top of our 2027 CAFD per share goal, there's an adequate amount of investment opportunity from late-stage projects that are largely retired in terms of their development risk on sourcing revenue contracts, equipment, the major permits that are required. So really, for much of what we plan to deploy through 2027, which supports our CAFD per share goals in 2027 and 2028, we've done the work that's necessary to be confident that there is an ability to allocate much of that capital. As we look out to 2028 and 2029 investments, the pipeline disclosures that we provided in that most recent earnings presentation also identified a pretty substantial number of late-stage assets for potential completion in 2028. That in total in late-stage assets added up to something approximating 2 gigawatts worth of projects. And we feel quite good about how those projects are advancing and are looking forward to providing further disclosures on that in the course of the coming quarter. So right now, as we are working as a business, a lot of my attention is focused on what we plan to build in 2029, which is not to understate the great work that our team needs to do to move through construction of everything else that we plan for completion in '27 and '28, but we feel very confident in those investment years and the work that's been done to prepare for investments in them. In 2029, we, again, feel quite good about the adequate raw material that we have. And it is quite possible that within a matter of quarters, we would be in a position to identify investment opportunities for CWEN that would exceed the totality of that $1.9 billion to $2.1 billion worth of capital that's available for allocation. And at that juncture, what we're going to be focused on is how to strike the right balance between growth and capital certainty for our investors. And as we've demonstrated over the course of the last year, we're going to continue to be mindful about how to find that perfect balance for our investors between growth and capital certainty. In terms of risk reduction, we feel pretty good about the relationships that we've built with each of the states that need to play enabling roles on our projects and with the administration in Washington, D.C. today. We have great respect for the execution culture of this administration and I think find ourselves in a position where we're -- we've demonstrated that we are listening to the administration's priorities and that we want to try to help it meet those priorities through the projects that we build. So there's work that needs to be done on any given project to obtain the local permits. There's certainly work that needs to be done with interconnecting utilities to assure that they stay on track to allow us to interconnect resources on time. We feel good that on the ground and at the national level, the work that we need to do to mobilize all that capital that you referenced will be done and that we're going to be in a position to meet those goals.

Terrific. We'll come back to those points because you've said a lot. So we'll come back. But -- but what are your focus, I feel with my conversations with investors is obviously around data centers and the flexible generation that you mentioned on the last earnings call, right? So I believe you're now designing 5 multi-gigawatt energy complexes directly with customer input. So where would you put them on the maturity curve today, right? Like early conversations, active development or kind of approaching commercial structure? Let's start with that.

Yes. Each of the larger complexes that we are developing have been built up over the course of the last [ two ] operating years from pre-existing land and interconnection queue positions and in some cases, a combination of existing operating assets or late-stage nearly construction-ready development assets. And it is really the combination of later-stage readiness for certain renewable and battery projects that could come online sooner and allow load service for a data center with the ability to construct dispatchable modern efficient gas fuel generation that helps assure adequate resources for the [ 99.999% ] reliability that data centers require that both create a readiness on the part of interconnecting utilities and regulators to enable the complex and creates interest on the part of a potential data center customer. And where we stand, I think, on any one of these given assets is that our ability to take preliminary load evaluations and design data into the more mature stages of load service request resolution with an interconnecting utility is kind of what paces the ability to commercialize a project. And as we've noted, I think those complexes really should be thought of as an opportunity for CWEN capital deployment in 2030 and beyond. They're part of how we expect we'll be able to deliver on our long-term compounding growth targets for Clearway Energy, Inc. And there are likely going to be constituent parts of some of those that will be entered into construction and present investment opportunities for CWEN in 2029. But the targets that we've outlined so far don't rely on the ability to get any one of those data centers into operation. This is part of our long-run vision for the future where we maximize the role that Clearway has to play for any of these technology companies. What I'll add to that is that we've had an enormously fruitful year this year in really mainstreaming relationships with the biggest technology companies in the country as a core part of our business. Really before this year, the focal point of our business was serving utilities who may, in turn, supply technology companies like those. And they remain really a mainstay of our business. We really cherish the relationships that we have with our utility customers in America. And we think they continue to have the most central role to play in ensuring that the digital industrial revolution unfolding in the country can be enabled because the companies that operate our transmission and distribution system and in many cases, partly or fully own the generation assets that supply it are really in an essential role to assure reliable resources are delivered to data center campuses. With that said, I think what we've found is that Clearway's track record of execution and the location of the projects that it's been creating exhibit a more premium value in today's marketplace than they might have historically for technology companies who need to be certain that they will have energy and capacity available to them on time. And our track record of fulfilling project commitments, I think, is one of the industry's best, and it's something that those companies really value in us. So from never having contracted with any one of the 4 or 5 largest hyperscalers before to now we've signed or awarded 1.8 gigawatts worth of contracts this year with those companies and have gigawatts worth of projects that we have in evaluation with them. And we're really pleased that we've built the kind of fluid relationship that we have with each one of them, which allows us to sift through a range of development opportunities to include those large complexes and get their feedback on what they most want. So the kinds of flexible generation resources that you first asked about are all being fine-tuned to create an aggregate technical proposition that's responsive to what companies like that one.

That's terrific. So I guess just to be more specific here, how are customers viewing gas today, for example? Is it as a reliability insurance, cost control or bridge to future technologies? And the second part of that question is also how are they thinking about thermal? How are you thinking about thermal development or the mix going forward relative to today?

Yes. I think one of the things that we really respect and appreciate about the current administration at the federal level and also thought processes unfolding out in the RTOs and ISOs is a clarified focused on the essential role of dispatchable resources, in particular, those that can provide longer duration seasonal support for a grid that sees low-cost renewables growing in the fraction of total terawatt hours that are served, but that absolutely continues to need dispatchable resources that make use of fuel in order to be able to balance a grid that has electricity demand increasingly on a 24-hour basis rather than simply during the afternoon peaks that for much of the U.S. historically were the peak or the evening peaks that in certain parts of the country during the wintertime exhibit at peak load. So when we think about the role of flexible generation resources that would be newly developed in the complexes that we're working on, both we and the hyperscaler companies who we engage with to say nothing of the regulators who are sustaining the grid, recognize that there's a pretty important role for gas fuel generation, in particular, to play in our power grid in the U.S. for quite some time. And as a company, though, much of what we've been building over the last decade have been wind, solar and more recently, battery projects. We have consistently said that we think there's great virtue in a U.S. grid that embraces fuel source diversity and that looks to natural gas, not as a bridge, but as an essential complement to renewable and battery projects, which together provide a system that's reliable, low cost and exhibits long-term risk reduction for ratepayers. And I think we see in Texas and California, 2 great case studies over the course of the last 3 years about how the combination of battery additions, continued additions of solar technology and reinvestment in a gas fleet can sustain really positive outcomes for reliability and can actually mitigate what you would have otherwise expected in escalating wholesale energy prices. So we hope to contribute to that kind of future expanding across the country. And where we're developing flexible generation assets today, the focal point is creating an asset that has a long-term contract to the extent that a Clearway affiliate is going to be an owner of the project, where the power purchase agreements on those assets extend as long as the 20-year renewable PPAs that we routinely sign and where the investment fully amortizes over the contract period or developing a complementary gas generation asset that the interconnecting utility would own themselves and then conveying the development asset to that utility alongside renewable or battery assets that Clearway Group and then Clearway Inc. could own the existence of that high-capacity factor gas resource is part of what allows them to serve load and integrate the renewable resources that will supply quite a lot of the total energy. So what we find from our engagement with technology companies today is that they're pragmatic. They continue to pay attention to carbon intensity. They recognize that in every single one of these complex cases, the presence of renewable and storage technologies actually reduce levelized energy cost in concert with gas resources and that the total package actually delivers on what's needed for a high reliability grid with a bulk of dispatchable resources while giving them a long-term predictable energy cost with a carbon intensity ratio that is consistent with their long-term goals.

Okay. That's super helpful. I think -- probably worth spending a little bit more time on thermal and storage, two areas of focus. Just on California thermal and the RA market. I think your California fleet represents maybe 5% of generation, but more than 25% of cash flow today. So my question to you, Craig, is what signposts are you watching between RA curves, imports, long-duration storage that would kind of indicate that, that earnings runway is shortening?

Yes. We feel really great about the position that our gas plants in California occupy and will occupy in California well into the future. I think one of the things we're really heartened by is the way that, in particular, during the last 3 years, elected officials and regulators in California have come together to apply pragmatism to their vision for fuel mix and resource adequacy assurance as we go forward into the future. The picture out in the West has been changing, and it will further change. For years, part of what enabled California to shift more of the energy that's served to customers towards renewables and solar, in particular, was its ability to rely on an interconnected West where excess generation in the Desert Southwest and the Pacific Northwest often could provide seasonal balancing when absolutely necessary. And in that environment and one where stress on the grid hadn't really been observed for some time, before 2022, regulators in the state or at least a number of elected officials were looking to a future where maybe gas resources would play a declining role, not just in the energy serve for the state, but also its capacity and resource adequacy. But 2022 taught us some important things in California. And what we saw that year was that coincident environmental conditions across the Western U.S. made it not feasible to be able to balance California's electricity demand with imports from those adjacent regions. And that was before we saw the rapid escalation in demand in each one of those adjacent states. So now throughout the West, while we're looking to integrate markets in ways that I think will eventually be beneficial to ratepayers, there's an increased recognition in California that California really needs to supply all the capacity that its consumers need, and it needs to do that largely with indigenous resources. And that there are certainly operating conditions and times of year where there's no better substitute than modern flexible generation resources like ours to be able to supply capacity that's much needed, especially in deep load pockets where our resources are located. So our fleet in California is located in the bridge between Los Angeles and San Diego in Los Angeles, proper deep in the city and then right next door to San Francisco with some of the newest large efficient gas plants in the state. And the state is going to need those long after all of us on this phone call are retired. And I think there's consensus now within the state that, that will be needed. So to your question around RA markets, what we are finding is that as the states reach that recognition over the last 3 years, how you implement a long-term market design that finds the right balance between a cost of service for customers that is affordable and a financial proposition for owners of flexible generation that rewards them for investment and sustainment of those assets is a balancing process. And we have an outlook that is conservative around how these assets are embedded -- are rewarded in our fleet that's embedded in our long-term $2.90 to $3.10 goal for 2030. But we see good reason to be confident both in that embedded outlook as well as the ability to outperform it. Our outlook is that there's kind of a Goldilocks long-term price for resource adequacy from resources like ours, high enough to be able to sustain investment in them, but not so high that it really makes it difficult to be able to make an objective argument for their important role in the system. It's probably something in the low double digits in long-term pricing. And we feel good that we will hit at least the targets that we've outlined in CAFD per share if it turns out that the numbers are even lower than that, although we think that they will -- we will fall into that area. In terms of long-term storage, long-duration storage, we're one of the biggest developers of solar and battery projects in the state of California. We are deploying next year one of the first 8-hour battery resources in the state. It's a great resource. It's going to provide a really necessary mid-merit role for dispatch. But the kind of role that our flexible generation resources provide really would only be fulfilled with something that's more like a 100-hour or at least kind of 60-hour type battery resource. And we engage with great interest with a variety of different companies that are trying to create those technologies and think that the research and development and the piloting work that's going into trying to prove them out is really a necessary part of the long-term future here in the U.S. But we don't expect those types of technologies to play a really significant role in California's grid for some time into the future. So we'll be an active watcher. When technologies are proven, we'll look to incorporate them into development assets. But as we look through to what's going to come online and serve load in the state, we would not expect that you're going to see much more than 8-hour battery resources, making up some fraction of the total dispatchable stack well into the middle part or later of next decade.

That's interesting. Super interesting. I think that you did identify a couple of battery opportunities on the whole, though. And there were 2 pretty significant 2027 opportunities identified. I think the Royal Slope 520 megawatt solar and storage and then WECC 210-megawatt storage. I guess my question there, to the extent you can, Craig, what milestones kind of remain before you can execute on that? And how should we think about the yields and timing into 2027?

Yes. As a company where we focus on developing battery assets, we're largely focused on battery or creating projects that are long-term toll resources that play a role in providing capacity to regulated utilities that play a role in balancing the system. So we've built one battery in Texas this year, where the role of the battery is really to be able to dampen resource volatility in Texas and its impact on gross margin as wind resource goes up and down. Everywhere else in our development pipeline, we're creating projects that will sell a toll capacity and energy resource for 15 to 25 years to some utility customer usually that will then take that resource and use it to balance the system. So that's what we're creating, you see that, I think, in the disclosure that you'd mentioned, you see disclosure around the Honeycomb Phase 1 program that we've been building out in Utah and around the combination of long-term contracted battery resources that we're completing next year for Clearway Energy, Inc. in California and Colorado. We've signed the contracts for the Royal Slope resources that I mentioned and the goal is for those to be built in 2027. It's a great project that plays a totally necessary role for a municipal utility in the state of Washington, where the ability to build new solar and battery resources is what allows them to interconnect new industrial customers because today, they're turning them away because they don't have enough energy and capacity in the state. The other resource that we have in development that we look forward to providing more disclosure on for completion in 2027 is basically the same story. It's provisioning new long-term contracted batteries so that a utility can interconnect new industrial loads within their service territory. And as you look later on over time, the single biggest fraction of our pipeline in development are battery assets, either paired with solar projects or on a stand-alone basis. And the situations where we're developing them are all universally in one location or another where the revenue contract profile would be long term, it would be fixed price. And we love these projects. So in our fleet, we're in our second full year of having a substantial amount of contracted battery capacity in our fleet, and the fleet of assets are performing at 99% availability exceeding what we underwrote. We've really built a great competency in our organization around design, engineering, procurement, commissioning of these battery resources. And when we bring them up, they are just a great contributor to our fleet because the kind of structures we use in long-term tolls mean that they're basically a fixed revenue stream provided that we've designed the projects correctly and we operate them well, and we do those things. So we're pretty excited about the role that these play for us financially because of the predictable stream of revenues they produce. And in consultation with the grid operators who we work with, they love them, too. The experience in California, in particular, has been that the rise of these kinds of battery resources are just enormously useful to the grid operator. And we expect that over time, we're going to see an eastward movement from the first markets that had more renewables on the margin, adopting these in California and the Desert Southwest and other markets in the Mountain West to markets like SPP and MISO, where the need for dispatchable batteries is certainly growing. And I'm cautiously optimistic that you'll see us give you announcements in coming quarters of how that market opportunity is moving eastward over time.

Terrific. That's helpful. Just a quick follow-up. How much of Clearway's long-term contracted growth relies on storage versus stand-alone renewables to the extent you can answer that?

I think the way that we set our long-term goals, in general, we kind of have individual projects that underpin a construction plan for, say, the next 3 years and a goal that we set 3 years out. For example, the goal that we articulated for CAFD per share in 2027 is based on a discrete number of fully contracted projects that are ready for construction or in construction already. So we'd be able to answer that question very specifically for everything we plan to build over the course of the next, say, 2.5 or 3 years. As we go out over time, part of what makes us confident when we set goals is that we have redundancy across many projects, not all of which need to be built in order to hit our goals. So the fraction of projects that we build in 2029 or 2030, for example, that will be battery projects versus a different type will be set probably another 18 months from now. But what I can say is that certainly as you get to those 2029 and 2030 years, the total capacity that's in development that could be completed starts to approach 40% to 50% of the total capacity that we bring online that could be a battery project that's stand-alone or a project that has a paired battery.

Super interesting. Okay. Shifting gears a little bit. Repowering is another area of opportunity for you, right? I think you've highlighted repowering is delivering close to 10% to 12% CAFD yields with the bulk of benefit showing up in 2028. So how meaningful do you think is -- or how meaningful is that uplift in the context of the '27 to 2030 earnings bridge?

Yes. Well, most of the investments that you'll see us execute in repowering will be funded by Clearway Energy, Inc. in 2027, which means that they'll contribute principally to CAFD per share in 2028 and beyond. In general, we don't factor partial year CAFD contributions from projects planned for completion in the middle of the year just to be certain that construction delays or anything else like that aren't a reason why we miss a target. So you can think of our repowering program with the exception of the first phase of Mount Storm, which will finish next year as largely being embedded in our 2028 through 2030 CAFD per share goals. When adding up the totality of investments that Clearway Energy, Inc. expects to make in those projects, in total, they exceed $500 million worth of corporate capital. And when we look to our confidence level around that articulated 2030 CAFD per share goal range and our confidence that we'll compound at 5% to 8% plus off of our 2027 CAFD per share goal. Certainly, that's supported by the repowering projects that we plan to execute in that vintage. Some words about the status of those projects to give you an opportunity to share the confidence that we have in them. We're now in a mode where I think we noted that we had awards or contracts on 4 of the fully named and disclosed projects in our last earnings call. And then in that call actually noted that we had finished a contract on the fourth of those. So all of them are contracted. We procured the equipment for all of them. They have all or substantially all of the required permits. And we're really good at doing these projects. We've actually now completed something like a gigawatt of them already. We love the predictability of resource that comes with these projects because we've had the opportunity to characterize wind resource over a period of ownership before we repower the project. The technical implementation of these projects is going to leave us with equipment that we feel great about for the long run. And for the 160 megawatts worth of additional repowerings that we didn't assign names to, we had noted our completion of safe harbor investments in the last earnings call. And to date, everything you've seen us identify as a repowered project or everything you've seen us identify as something we've safe harbored we've ultimately seen through to construction. And so we feel pretty good about adding that last 160 megawatts worth of projects to our construction program as well. So I think in total, these are part of how when you think about the $2.1 billion worth of capital deployment opportunity that you'd asked about, we feel a large part of that is already committed or soon to be based on our confidence in these projects. And the structure of these contracts, which on average are 20 years or better, the technology that we're deploying, the resource that we've characterized are going to make these all great contributors as we look out to 2030.

Thanks, Craig. Before I have a whole lot of questions that are coming through here. But before I shift to those. I have one question. Just sticking with the theme of growth levers, right? This year, you did 3 transactions above 12% CAFD yields, right? Do you see a massive opportunity for more M&A given distressed platforms? Is this something we can continue to expect? Maybe you can talk a little bit about the environment that we're operating in.

Yes. We're really pleased with the work we did in this part of our business this year. Not just the fact that we did these deals or even the CAFD yield that you note, but what I'm most proud of is the way that we did them and the things that we chose to focus on. For those who want to look back to our third quarter earnings call, they'll see a presentation slide that we incorporated so that people could see a little bit more of the embedded craftsmanship that's involved in how we produce those returns. And the way we've done that in the case of each one of those assets is choosing to focus on an individual acquisition opportunity where we were able to create a revenue contracting structure that maybe not everybody would, that we were able to harmonize operating synergies with existing plants that we have. And where we had a seller who really valued the execution certainty that Clearway represented. There are a lot of things that we could have worked on for M&A this year, and we chose to focus on those situations where we had a real value add and where we could deliver something that would be a highly accretive use of capital that we had not incorporated into our original capital allocation plan. So that's sort of the standard that we hold ourselves to. And candidly, for a large portion of the last 5 years, it wasn't possible for us to produce returns like that even when we were applying know-how because the supply of investment opportunities in operating projects relative to the demand of capital that wanted to invest in them was just out of balance. The other thing that was happening over the preceding 5 years was that a lot of the operating asset M&A that happened in aggregate was contained in some bigger platform, where either a strategic buyer or a financial sponsor was prepared to pay an embedded value for operating assets that would not be accretive for the shareholders of Clearway Energy, Inc. in part because they wanted to access a platform as an avenue for growth into the future. And of course, in Clearway, we already have one of the leading platforms in the industry. And so the ability to justify a payment for franchise value somewhere in our enterprise structure was just something that didn't make sense for us. As you know, conditions are different today than they were for much of the last 5 years, and that supply-demand balance between investment opportunities and capital that wants to be deployed is favorable for enterprises like ours. So we'll continue to be in the market of opportunity and evaluating whether there are opportunities next year for assets or clusters of assets like those that we bought to be added to our plan to the extent that we think we can continue to deliver above-market returns through the application of our know-how. That's really where we focus first is around assets and clusters of them because they exhibit the greatest opportunity for us to produce excess value and also because it allows us to fit them in bite-size into increments of increase to our capital allocation plan. But as fiduciaries, we'll certainly keep an eye out for whether there's something strategic that's possible too. Our basic standard of care in any of these situations is that we've got a good plan. We know how to execute our plan. Our plan does not require us to buy something to execute on it. And in total, our plan delivers really one of the best total return propositions in the U.S. utility and clean energy complex. So to the extent that we're going to engage on incremental M&A, it really has to meet a high bar for shareholder accretion. And our investors can expect that we'll continue to really apply that rigorous standard of care where to the extent that we're going to engage on acquiring something, we'll only be doing that if we feel like it's going to deliver a result that is just unquestionably great for our investors.

Terrific. And I have a question coming in from investor here. I think you've signaled close to $40,000 per megawatt CAFD at a 10.5% recurring yield for '28, '29 COD assets. Just trying to understand the economics, if they're getting easier or harder to achieve today given EPC interconnection and supply chain dynamics. And then as a follow-on, is the development pace in the safe harbor window faster, slower or the same as it was prior to OB3 and how do you kind of think about that pace of development in the post-ITC window relative to the safe harbor window. So a lot there for you to add to that.

The $40,000 per megawatt CAFD goal, we know how to hit. We wouldn't set it if we didn't know how to. It's representative of where we have been organizing revenue contract structures and project capital structures and project implementation costs and the PPAs that we've been signing recently. And as we're looking ahead to projects we're commercializing for completion in 2028, we feel like our confidence in the ability to deliver those unit metrics is being sustained. We are not really seeing gross project costs or I should say, unit project costs continuing to inflate in the way that they did between 2020 and 2024 or early '25. The ability to digest today's supply chain policy for the U.S. is starting to become clearer. Certainly, there are some new trade case resolutions that are forthcoming, but we've anticipated a range of potential outcomes for those in the revenue contracts that we're signing and the equipment supply agreements that we're arranging where together with partners who are either customers or suppliers, we establish a corridor of outcomes that we share in together. And we feel confident that across a range of policy scenarios that -- those sharing mechanisms will work, and they'll put us in a position to deliver those kinds of unit metrics. And as we look later in the decade, we spend a lot of time talking with our EPC suppliers and our equipment vendors about how we can recatalyze a deflationary cycle in 2030 and beyond through evolutions in product design and evolutions in plant design through increasingly large projects so that we can sustain investment propositions for projects that are attractive in a world pass tax credits and deliver cost deflation for consumers in America that need it. And I think we've got a vision forming with each one of those role players in the industry value chain on how we do that. So that's the first question. We feel good about the $40,000 a megawatt. We feel good about delivering 10.5% CAFD yield. We feel good about doing that with things that we're doing right now in revenue contracting and equipment supply. I think the next question, Dimple, if you can help remind me.

Safe harbor. The pace of development in the safe harbor window, right...

Yes. So I think we're seeing the pace of volume that we plan to take into construction and that we plan to finish in any given year accelerating. In a lot of ways, that's not so much a function of safe harbor tax credit entitlement. It's a function of maturation of interconnection queues in a lot of ways where what paces what we build more than anything else at this juncture is the time at which an interconnection queue position, which in many cases, was filed 5 years ago or more can turn into an in-service date for a project. And what's allowing us to look to an increasing volume opportunity ahead of us in '28, '29, '30 and '31 is progression of interconnection queue positions that were filed some time ago and a narrowing of the range of potential schedule outcomes with interconnecting utilities and RTO. So as we look to the end of the decade, what's going to allow for us to be building more volume is just the ability to interconnect more volume and projects on average getting bigger in our development pipeline, which allows us for the 5 or 6 projects we try to build in any given year to deliver more CAFD to deliver more megawatts as any individual project gets bigger. In terms of the ability to continue to build at a multi-gigawatt per year throughput beyond 2030, we're not especially anxious about the ability to do that as the tax credit safe harbor window evolves for a few reasons. First, and we provided great disclosures on this in our call in August of this year. The places where we're developing wind and solar projects are places where wind and solar projects are least cost best fit. There are a great number of other fuel sources. They're in places where those are really fundamentally the cheapest way of supplying electrons that people need, places in the Mountain West or the Pacific Northwest, around wind places for solar around the Desert Southwest and the Mountain West and also for some very large projects east of there. So we think the technologies are going to make sense for people to procure from whether there's a tax credit that they're entitled to receive or not. Also, batteries, as I noted before, represent the largest fraction of our pipeline. And to the extent that your point of view is that tax credits are needed for projects to be viable, those projects will be able to start construction as far out as 2033 and be placed in service into the end of next decade with the ability to claim tax credits. So those project types, which I'd noted we love to own, play a great role in power grids are going to be entering construction with tax credit entitlements for a decade to come. So we're not planning on a decline in our construction volumes as we get past 2030. We're planning to keep them right where they are, if not growing. And really what's going to dictate our volume, I think, is going to be what we can interconnect and when we can interconnect because really what we're finding in our pipeline today is that everything we can permit and everything we can interconnect, we can build profitably and our customers want to see us build.

Perfect. Thank you, Craig. And the final question that comes from the audience today is, how do you think about the evolution of equipment pricing and also PPAs in the post-ITC window relative to today?

We think what our industry needs to do, and when I say our industry, I really mean the entire value chain that delivers electricity to customers in the U.S. We need to find a way to hold prices where they are today or over time to deliver a declining cost per kilowatt hour per kilowatt to ratepayers. I think as a matter of necessity in an environment where supply is less than demand and where the cost of inputs have been growing, the price of new increments of power generation in the country are going up. And we need to provide our country's most critical commodity at a level that's affordable. And so what we're focused on as a company, and I think we're joined by the leading providers of electricity in the country is a vision where as we get through the surge of construction that's needed over the next 4 years or 5 years in the country, we find a way to start to be building projects at a declining price of product as we get to 2030 and beyond. So when we think about the mandate, when we think about what we need to do, what's in our head is whether there are tax credits on projects or not. We need to be delivering our product at the same price that we are today, if not a lower one as we get into next decade.

Okay. Wonderful. Thank you for that. I think this is a good place to close. So ladies and gentlemen, all the investors on the line, thank you so much for joining us today. And Craig, thank you for your time. It was an absolute pleasure, and I look forward to chatting to you soon.

Yes, yours, too. Thank you, everybody.